Investopedia: Central European Distribution Still A Mess

Investors don't have to search especially hard for evidence that liquor and spirits businesses can be ludicrously profitable if run well. Unfortunately, Central European Distribution (Nasdaq:CEDC) shows quite clearly what happens when a business is over leveraged and not run especially well. While there is definitely value in this business, it is very much an open question as to how much (if any) of this value will reach shareholders.

Another Messy Quarter
For a company that may have legitimate "going concern" issues, CEDC's fourth quarter wasn't really all that bad. That said, it was fairly confusing.

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Investopedia: Yet Another Disappointment From Central European Distribution

At some point, a company's travails can no longer be just about a difficult market. Sooner or later, management has to step up, acknowledge mistakes and craft a plan for better results. Although Polish and Russian vodka producer Central European Distribution (Nasdaq:CEDC) still has a lot of inherent value in the business, investors cannot afford to have much confidence in management anymore. Sooner or later, the question has to be asked whether the markets are truly so challenging or whether management simply isn't up to the challenges.

Another Big Miss  
CEDC reported that revenue grew 45% third quarter in 2011 compare to same period in 2010, with 25% value growth in Russia and 7% value growth in Poland. Although volumes were strong in Poland (up 18% compared to third quarther 2010), growth in Russia was just 3% and well below management expectations.

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Investopedia: Diageo Standing Out In A Disprited Market

Normally, booze is a great business. When times are good, people drink to celebrate. When times are bad, people drink to commiserate or forget. Better still, alcohol is expensive, easy to make and requires precious little research and development (though plenty of brand-building and marketing support). And yet, that idyllic reputation isn't working out so well right now. As consumers find their budgets increasingly stressed, they seem to be drinking less and turning to cheaper brands.

That makes Diageo (NYSE:DEO) unusual. While several major alcohol companies have recently disappointed the Street and worried investors with disappointing results and guidance, Diageo seems to be doing relatively well. With good growth in emerging markets, it looks like Diageo can wait out the turbulence in North America and Europe and perhaps add a few more good brands to its world-leading stable. Think of it like Coca-Cola (NYSE:KO) or PepsiCo (NYSE:PEP) for the adult crowd.


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Investopedia: Investors Shouldn't Tune Out Central European Media Media

Want to invest in the growth of central and eastern Europe (CEE)? Good luck. There are a couple of ADRs that trade on occasion, but otherwise investors who can't invest directly in these foreign markets are left with ETFs, mutual funds, and a handful of listed plays like Central European Distribution (Nasdaq:CEDC) and CTC Media (Nasdaq:CTCM). 

Scarcity doesn't automatically make a stock a good value, but with leading positions in several CEE broadcast markets, investors ought to consider Central European Media (Nasdaq:CETV). While ad spending remains challenging and cost inflation is an ongoing risk, the worst seems to be over for this often overlooked company. (For more on inflation, see The Importance Of Inflation And GDP.)


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Investopedia: Central European Distribution - From Russia, With Disappointment

Although the Russian character is suffused with a grim fatalism, there is also a strong history of resilience in the face of adversity and an unwillingness to back away from a challenge. Though Central European Distribution (Nasdaq:CEDC) is technically an American company, this leading producer and seller of vodka in Russia and Poland may do well to take a page from its customers. While CEDC is a liquor company with real prospects for the future, it has just as many real problems in the present. 


A Bad End To A Hard Year
For much of 2010, Central European Distribution has better resembled the Gang That Couldn't Shoot Straight. Missed, and then lowered, guidance had been an issue throughout 2010 and there was always something else to blame - a cold winter, a hot summer, a tragic plane crash that killed Poland's president, other important government figures, and 96 people in total.

Maybe it should not have been surprising, then, that CEDC would miss again in the fourth quarter. Revenue dropped 11% for the final quarter and certainly missed estimates. This time the company pointed to production problems during the peak selling season as the culprit, but the company did note that volumes increased in Russia by 8% and the company stabilized (and then reversed) market share losses in Poland.


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A Melancholy "Do Svidaniya" To Wimm-Bill-Dann

It is always something of a shame when a good company gets bought out and goes away, and even more so when the company is a relatively rare play on a market. Wimm-Bill-Dann (NYSE: WBD) is one of the relatively few Russian companies with liquid ADR shares in the United States, and it's an even scarcer consumer goods company. Now, with Pepsico's (NYSE: PEP) proposed buyout of the company, shareholders get a nice parting gift, but international investors are left a bit poorer for choice. 

Terms Of The Deal
Under the deal announced Thursday, Pepsico will pay $3.8 billion (or $33 per ADR) for a 66% stake in Wimm-Bill-Dann. As a condition of Russian law, Pepsico will then be required to make a buyout offer at the same price to minority shareholders. I frankly admit that I am not an expert in Russian M&A law, so I do not know what happens if the minority shareholders elect to refuse the deal. But I imagine that Pepsico would, at a minimum, cancel the ADR program even if it cannot complete a deal for 100% of the shares. (For more, see ADR Basics: Introduction.)

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Constellation Brands Not Going Nova Yet

People may drink through good times and bad, but that is no guarantee that they will remain loyal to the same brands. Not only have overall economic conditions hurt Constellation Brands (NYSE:STZ) since the beginning of the recession, but ongoing turbulence in consumer preference has made for unstable results.

The Quarter that Was
All things considered, this leading wine maker actually had a pretty solid fiscal second quarter. Reported sales dropped 2%, but this was due in part to the sale of the company's U.K. cider business. On an organic basis, sales were actually up 2%. Going a little further, wine sales grew 4% in the U.S., Europe and Australia, while spirit sales were down 15%. 


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A Market That Will Drive You To Drink

Amidst all of the gloom, doom and boom in the world these days, there is one inevitable constant. People drink. People drink to celebrate, to mourn, to console, to toast, and sometimes, just to pass the time. Though no business is truly immune to economic conditions, investors can look towards alcohol companies as a relative source of stability in very unstable times. 

Beer
AmBev (NYSE:ABV), a subsidiary of Anheuser-Busch InBev (NYSE:BUD), is not only the dominant brewer in much of Latin America, but one of the most profitable beverage companies in the world. Ridiculously efficient, AmBev should benefit not only from leading brands, but the relatively low per-capita consumption in its markets. Investors will also be pleased to know that the company has to distribute at least a third of its earnings to shareholders in profitable years.  

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